The Village Banks (BRI-UD) of Bank Rakyat Indonesia (BRI)
Real GDP growth in Indonesia has averaged 6.8 percent during 1990-1994. This growth has resulted in an increase in demand for credit which contributed to the rapid growth and success of the Village Bank programme of BRI.
BRI is a state-owned bank which ran a programme of directed subsidized credit for rice farmers until 1983. The Unit Desa (BRI-UD) or Village Bank, was established in 1984 as a separate profit center within BRI, under a General Manager who reports directly to the BRI Board of Directors.
BRI-UD consists of a nationwide network of small village banks. The founding objectives of BRI-UD were to replace directed agricultural credit with broad-based credit to the rural population involved in any type of economic in any type of economic activity; to replace subsidized credit with positive on-lending rates with spreads sufficient to cover all financial and operational intermediate costs; and to provide a full range of financial services (savings as well as credit) to clients. All these objectives were achieved only a few years after the programme's inception, and BRI-UD's phenomenal success in savings mobilization became its distinguishing achievement. Various other financial institutions including the Badan Kredit Kecamatan (BKK) which targets the extremely poor rural population are operating along similar guidelines in the Indonesian rural lower-income market.